Savon Gas Stations No. 6, Inc. v. Shell Oil Company

• Decision Date: 14 March 1962
• Docket Number: Civ. A. No. 13374.
• Parties: SAVON GAS STATIONS NO. 6, INC., a Maryland corporation, and A. & H. Transportation, Inc., a Maryland corporation, v. SHELL OIL COMPANY.
• Court: U.S. District Court — District of Maryland

203 F. Supp. 529

SAVON GAS STATIONS NO. 6, INC., a Maryland corporation and A. & H. Transportation, Inc., a Maryland corporation, v. SHELL OIL COMPANY.

Civ. A. No. 13374.

United States District Court D. Maryland.

March 14, 1962.

Lawrence I. Weisman, David M. Blum, Baltimore, Md., for plaintiffs.

William Simon, James T. Reilly, Washington, D. C., for defendant.

WINTER, District Judge.

Defendant has moved for summary judgment upon the two count complaint filed against it to recover treble damages under Section 4 of the Clayton Act, 15 U.S.C.A. § 15, for violation of Sections 1 and 2 of the Sherman Act, 15 U.S.C.A. §§ 1 and 2, and to recover damages and obtain injunctive relief under Maryland common law.

The dispute between the parties arises out of a lease, dated October 13, 1954, entered into between the defendant and the owners of the Middlesex Shopping Center (hereafter called Middlesex). Middlesex occupies a portion of the triangular area in Baltimore City bounded by Eastern Boulevard, Essex Avenue and Marlyn Avenue. The lease required the owners of Middlesex to construct a gasoline service station for defendant, and, inter alia, contained the covenant, designated as Article 1A:

"Lessor Middlesex covenants and agrees that, throughout the term of this lease or any extension thereof, Lessor will not use or permit the use of other property belonging to, acquired, or controlled by Lessor or Lessor's principal stockholders, and situated in the area bounded by Eastern Boulevard, Essex Avenue, and Marlyn Avenue, for the purpose of a gasoline service station, or similar enterprise, which would compete with the business of Shell being conducted on the premises."

Defendant's service station was constructed pursuant to the lease and opened for business in 1954.

The lease was promptly recorded among the Land Records of Baltimore County. Under date of July 23, 1956, plaintiffs acquired a long-term lease on a parcel of property fronting on Eastern Boulevard and immediately adjacent to Middlesex dlesex for the purpose of maintaining and operating another competing gasoline service station. Plaintiffs' service station was opened for business on August 31, 1956. Plaintiffs' station was constructed by the principals of Middlesex pursuant to an alleged oral agreement in regard to a right-of-way in such manner that the patrons of Middlesex, and particularly those motorists who parked in the parking area which was a part of Middlesex, could enter plaintiffs' station without the necessity of driving from the parking area to Eastern Boulevard, and from Eastern Boulevard to plaintiffs' station. Conversely, patrons of plaintiffs' station could also leave plaintiffs' station by driving onto the Middlesex area without the necessity of first driving onto Eastern Boulevard.

After plaintiffs' station had begun operations, defendant, under date of October 19, 1956, wrote to the owners of Middlesex stating that defendant was aware that "* * * certain of your lands are being used for entrance into a service station built and owned by another oil company," and that "* * * such use is violative of the restrictive covenant of Article 1A of the lease with us," and, further, that "* * * we trust you will immediately explore this matter with your attorneys and initiate such action as they suggest will leave you in full conformance with the legal and moral obligations which you have assumed."

Promptly after receipt of this letter, the owners of Middlesex erected a barrier between the parking area of Middlesex and the rear entrance of plaintiffs' station. The original barrier, constructed of individual wooden posts, was removed by plaintiffs' employees almost as rapidly as it was erected. Later, a concrete barrier, in the nature of curbing, was erected and, apparently after some question as to whether the curbing had been placed along the common line or upon plaintiffs' lands, a second concrete curbing was put in place.

Plaintiffs allege that the presence of these three barriers effectively prevented the movement of automobiles between the parking area of Middlesex and the contiguous area of plaintiffs' station, other than via Eastern Boulevard, and that plaintiffs' sales of gasoline and related products sharply diminished.

In the first count of the complaint, plaintiffs allege that they and defendant are engaged in price competition and that defendant "* * * commenced and continued a series of concerted actions carried out through oral communications and correspondence addressed to the operators of Middlesex Shopping Center and others, which concerted action was designed to prevent the use of the subject right-of-way by the customers and patrons of the Middlesex Shopping Center over the land of the plaintiffs" (¶ 18). Further, plaintiffs allege that the lease between defendant and Middlesex "* * contained an unreasonable restraint of trade" by the inclusion of the restrictive covenant set forth above, and that defendant "* * * allegedly purporting to rely upon said inapplicable and unreasonable restrictive covenant, but in fact seeking to destroy Plaintiffs and eliminate price competition offered to Shell by Plaintiffs" (¶ 19) procured the operators of Middlesex to erect barriers along the common line and has in fact destroyed price competition between the defendant and the plaintiffs in the sale of gasoline and petroleum products (¶ 20). Specifically, plaintiffs allege that the foregoing constitute a conspiracy between defendant and owners of Middlesex to restrain plaintiffs' trade and commerce (¶ 21).

In count 2, plaintiffs repeat all of the allegations contained in count 1, and make the further allegation that the "wrongful and unlawful" acts of the defendant maliciously, illegally and unlawfully interfered with the advantageous relationships and contractual rights of the plaintiffs, in violation of the common law of the State of Maryland.

In its motion for summary judgment, or, in the alternative, to dismiss the complaint, defendant maintains that the obtention of the restrictive covenant was not in violation of the Sherman Act, nor was its enforcement, that the restrictive covenant was valid under Maryland law, and that, in any event, plaintiffs' cause of action, if any, is barred by the federal antitrust statute of limitations, contained in Section 4B of the Clayton Act, 15 U.S. C.A. § 15b as to count 1, and the statute of limitations contained in Section 1 of Article 57 of the Annotated Code of Maryland as to count 2. In making these contentions, defendant asserts that no case has held that a restrictive covenant of the type set forth above violates the Sherman Act, that the restrictive covenant from which the dispute arises is not a covenant which was obtained "in interstate commerce," and the effect of the covenant on interstate commerce is not sufficiently substantial to bring the federal antitrust statutes into play. Additionally, defendant contends that the validity and enforceability of the restrictive covenant is well-settled by the Maryland law. The Court has before it, on which to decide the motion, the complaint, the deposition of Mr. H. S. Eustis, Baltimore Division Manager of defendant, taken by plaintiffs on December 6, 1961, the deposition of Mr. Harry Waller, president of plaintiffs, taken by defendant on the same day, and an affidavit of Mr. Harry Waller filed under the circumstances later described.

On February 2, 1962, when the motion came on for hearing, counsel for plaintiffs filed with the Court an affidavit made by one of them, purporting to indicate, in accordance with the provisions of Rule 56(f), 28 U.S.C.A., why plaintiffs were unable to show that there existed a genuine issue as to a material fact at that time, and asking that summary judgment be denied in order to enable plaintiffs to institute discovery proceedings by way of interrogatories, further depositions and admissions of fact, before the Court would consider the motion on its merits. This affidavit was substantially a redraft of an affidavit supporting a motion which had been presented to the Court in chambers on December 28, 1961, praying an indefinite continuance of the hearing on the motion.

The motion presented in chambers was denied, on the ground that an affidavit in compliance with Rule 56(f) was the proper procedure by which the continuance should be requested. Inasmuch as plaintiffs had had ample opportunity, since December 2, 1961, the date on which the first depositions were taken, to initiate interrogatories and further discovery and, since the failure of the plaintiffs to take such steps could only be explained by counsel at the time of the hearing on the ground that interrogatories could not be framed until "private discovery" by way of private investigators was completed — an explanation which could not be accepted by the Court — the affidavit was rejected as lacking in bona fides and made solely for the purpose of delay, and the motion for summary judgment argued and submitted. Subsequent to the hearing, plaintiffs served interrogatories upon defendant and filed with the Court the affidavit of Mr. Waller. The interrogatories came too late to demonstrate plaintiffs' bona fides in seeking to postpone decision of the motion. Accordingly, the Court extended the time for defendant to answer plaintiffs' interrogatories until the motion for summary judgment is decided. Rule 56(c) fixes the date before the hearing as the last day on which opposing affidavits may be filed, and indicates that in the usual case the motion must be decided on the record as of the date of the hearing on the motion. However, paragraph (e) of the Rule provides that, "The court may permit affidavits to be supplemented or opposed by depositions or by further affidavits." Although leave has not been requested, the Court has permitted the Waller affidavit to be filed and has considered it in deciding the motion.

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At the outset, the Court is...